Press Releases

April 10, 2013

President Obama Wrong to Propose Immediate Cuts on Social Security Beneficiaries

By Doug Hart, President, Arizona Alliance for Retired Americans

Unfortunately, President Obama included cuts to the Social Security cost of living adjustments (COLA) in his recent budget release. These cuts, in the form of the chained CPI formula, could have an impact on over 1,067,717 Social Security beneficiaries in Arizona, including over 220,000 in Pima County alone.

Although the President’s budget will not be voted on, there is cause for concern that a “grand bargain” coming down the pike would include similar cuts and impact retirees significantly.

The chained CPI formula for calculating Social Security cost-of living adjustments (COLAs) does not reflect the economic activity of seniors and amounts to immediate benefit cuts for current beneficiaries. Estimates are that someone who retires this year would lose more than $6,000 in benefits over 15 years if the chained CPI were in effect, because it would decrease the already low cost-of-living inflationary protections.

First off, the idea of adopting the chained CPI as part of deficit reduction efforts is truly bad policy, because the program does not contribute to the deficit to begin with. The Social Security system by law cannot borrow money and has not contributed to our nation’s deficit.  To cut benefits by adopting the Chained CPI in the name of deficit reduction is just plain wrong.  It asks seniors to pay for a fiscal debacle they did not create out of their very modest Social Security benefits.

The chained CPI is also bad policy because the current COLA already vastly under-estimates the inflation experienced by seniors and people with disabilities – and the chained CPI would take this a step further.

Social Security benefits are modest by virtually any measure. The average annual Social Security retiree benefit in Arizona is under $15,000 per year. Beneficiaries who live on very modest means cannot easily absorb such a large cut to their benefits. Additionally, our nation is facing a retirement income crisis, and cutting Social Security will make that crisis even worse.

The so-called Chained CPI is based on an economic theory that goes something like this: Your doctor tells you that you need triple heart by-pass surgery.  You will opt for the cheaper alternative, a double by-pass. I’m not making this up.

The chained CPI assumes that a lower COLA is acceptable because consumers substitute cheaper products when prices go up. Health care costs, however, consume a large amount of seniors’ income. These costs cannot simply be substituted with a cheaper version.

Seniors must spend more of what we have on health care, prescription drugs, energy than the general population. The Chained CPI does not take these facts into account.

Our elected officials should not play with the well-being of seniors in such a matter-of-fact way. The chained CPI is a flat-out benefit cut for Social Security beneficiaries. There are better ways to strengthen Social Security that do not involve throwing our seniors under the bus.

Arizona Alliance for Retired Americans is a statewide organization with over 40,500 members that works to protect the health and economic security of retirees and older Americans. 

State Social Security info by state: http://strengthensocialsecurity.org/resources/state-reports

Posted 14:35PM on April 10 2013 by Doug Hart
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